Yesterday, the U.S. Treasury Department announced it will be selling 200 million shares of General Motors stock back to GM over the next fifteen months. The stocks will be bought starting at $27.50 a share, and if that price stays basically constant, it will total about 12 to 14 billion dollars for the Treasury. However, that’s 21.6 billion dollars short of the government’s bailout funds which need to be repaid.
Some, especially initial critics of the auto bailout, claim that the American taxpayers are seen as losing out on this deal. Also, they stress that if the company was able to simply file for bankruptcy, their competitors could have benefited from some fresh talent, which could have been better for the domestic auto industry in the long run. But supporters of the auto bailout continue to back the government’s involvement, despite selling these stocks back at a loss. That’s because they cite the fact that the bailout saved 1.5 million jobs, an entire domestic industry and several communities which depend on General Motors for their entire survival.
What side do you take? Is it fair for taxpayers to foot the bill for one industry, even if it is seen as a cornerstone of America? Is this the price we pay for letting the financial industry crash in the way it did? What are the pros and cons as we see now how this all is playing out?
Dan Ikenson, director of Cato’s Herbert A. Stiefel Center for Trade Policy Studies
Sean McAlinden, Chief Economist at the Center for Automotive Research